NEMO Settlement and Banking Information Settlement and Banking Sessio · European Commodity Clearing

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  • 16th February 2017

    NEMO Settlement and Banking Information Session

    1

  • 2

    Agenda

    Timing Topic Speakers

    10:30 10:35 Introduction Robert Mc Carthy

    10:35 12:30 ECC Settlement & Clearing Overview Susann Just-Marx

    12:30 13:30 Lunch & Networking All

    13:30 13:45 Unicredit Banking Overview Tomas Trsek

    13:45 14:00 Keler Banking Overview Sndor Szalai

    14:00 14:15 Wrap up/Next Steps All

    14:15 15:00 Questions and Answers All

  • European Commodity Clearing AG

    NEMO Settlement & Banking

    Information Session

    16 February 2017

  • Agenda

    1. Morning session

    1) Membership Options and Registration Process at ECC

    2) Risk Management: Limits, Margins, Collateral

    3) Daily activities: Financial and Physical Settlement

    4) ECC Systems and Reporting Functionalities

    5) Q&A

    2. Networking Lunch Break

    3. Afternoon session

    1) Presentation of Banking Organizations

    2) Q&A

    4

  • Introduction Overview EEX Group and ECC

    Part

    ner

    Exchan

    ges

    Cle

    aring

    House

    EEX operates transparent markets for energy and commodity products. At EEX, contracts on Power,

    Emission Allowances, Coal as well as Freight and Agricultural Products are traded or registered for

    clearing. Alongside EEX, EPEX SPOT, Powernext, Cleartrade Exchange (CLTX), PXE, Gaspoint Nordic

    and CEGH are also part of EEX Group.

    Clearing and settlement of trading transactions are provided by the integrated clearing house European

    Commodity Clearing (ECC). ECC also provides clearing services for SEEPEX, HUPX and NOREXCO.

    5

  • Clearing Member SEMOpx

    (Business) Transaction

    (Business) Takeover Nomination/Delivery

    SEMO

    Trading

    Participant 1

    2

    Collection of securities

    Payments

    Guarantee function

    3

    4

    Nomination/Delivery 4

    Membership Options Non-Clearing Member Model

    Non-

    Clearing

    Agreement

    Non-

    Clearing

    Agreement

    Irish Power Market (Spot Only at the moment):

    Clearing Members act as guarantor and payment agent for all trades concluded on the

    Spot Market. They collect margins and all payments from their clients (trading participants).

    6

  • Settlement

    Bank SEMOpx

    (Business) Transaction

    (Business) Takeover Nomination/Delivery

    SEMO

    Trading

    Participant 1

    2

    Payments 3

    4

    Nomination/Delivery 4

    Membership Options Direct Clearing Participant / Settlement Bank Model

    Irish Power Market (Spot Only at the moment):

    Settlement Banks act as payment agents for all trades on the Spot Markets, e.g. provide

    accounts which can be used for all payments necessary for buying/selling power at the spot

    market. All trades of the Trading Participant need to be prefunded.

    Direct

    Relationship

    with ECC

    3

    Bilateral

    Agreement Bilateral

    Agreement

    7

  • Membership Options Comparison of different Membership Models

    Non-Clearing Member Direct Clearing Participant

    Markets All markets Spot &

    Derivatives Spot only

    Bank Clearing Member (CM) Settlement Bank (SB)

    Guarantee function Yes, Clearing Member No

    Limit Voluntary,

    Set by Clearing Member

    Mandatory,

    Set by ECC based on collateral &

    credit limit set by ECC

    Prefunding

    No collateralization towards

    ECC but potentially towards

    the CM

    Collateralization of pre-trade limit in

    advance with collateral accepted by

    ECC

    Collateral Collected by CM, dependent

    on by CM accepted collateral

    Deposited by DCP,

    only ECC-accepted collateral

    Default Fund

    Contribution Clearing Member obligation DCP obligation

    Margining Yes, IMSM and CESM No, neither IMSM nor CESM

    8

  • Membership Options Requirements

    9

    Non-Clearing Member Direct Clearing Participant

    Passing ECCs KYC assessment

    Balancing Agreement with SEMO

    Approved as a Trading Participant at the Exchange

    Agreement with Clearing Member and ECC Agreement with Settlement Bank

    Defined by Clearing Member

    Country of origin approved by ECC for

    Direct Clearing Participants

    Contribution to Clearing Fund depending on

    trading limit

    Deposit of Collateral

    Minimum equity of 50k

    or support by guarantee of parent company

  • Membership Options Comparison of Membership Models

    Fees are settled via a DCPs Settlement Bank or a NCMs Clearing Member.

    10

    Non-Clearing Member Direct Clearing Participant

    Exch

    an

    ge

    Exchange Level Annual Fee & Variable Transaction Fee

    to be determined

    EC

    C

    Variable Fees

    ECC Clearing Fees for spot market:

    0.7 EUR-Cent/MWh for all transactions,

    both Day-Ahead and Intraday

    Annual Fee None but variable fees of at least

    1,000 EUR

    12,500 for all spot markets

    9,000 / 6,000 for single

    market

    (e.g. Irish Spot Market)

    Expenses for cash respective negative interest rate on cash collateral

    Limit Adjustment Fee depending on CM 100 / 70 per limit /collateral

    adjustment

    Ba

    nk

    Bank Fees Individual Bank fees depending on bank and model

  • Contact a Settlement Bank or Clearing Member

    Submit admission forms to ECC

    ECC reviews admission documents

    Technical setup of trading and clearing systems

    Admission as Direct Clearing Participant or

    Non-Clearing Member

    1

    5

    2

    3

    4

    Registration Process ECC Admission Process

    11

    Deadline ECC documentation package:

    7 Aug 2017 (to be ready for Market Trial starting Dec 2017)

  • Registration Process Clearing Members & Settlement Banks Network

    February 2017

    2

    11 1

    2

    1

    2

    1 1

    2

    23 Clearing Member ABN AMRO Clearing Bank N.V.

    Banca Akros SpA

    Banca Popolare di Sondrio SCPA

    Banco Santander, S.A.

    Bayerische Landesbank

    BNP Paribas Commodity Futures Ltd.

    Citigroup Global Markets

    ED&F Man Capital Markets Limited

    Goldman Sachs International

    INTL FCStone LTD

    J.P. Morgan Securities plc.

    KELER CCP Ltd.

    Macquarie Bank International

    Marex Financial Limited

    Merrill Lynch International

    Morgan Stanley & Co. International plc

    Nordea Bank AB, Frankfurt Branch

    Oesterreichische Kontrollbank AG

    Raiffeisenbank a.s.

    Renta 4 Banco

    Societe Generale Newedge UK Limited

    UBS AG

    UniCredit Bank Czech Republic and

    Slovakia, a.s.

    1 Settlement Bank ABN Amro Bank N.V.

    1

    12

  • Registration Process Application Forms

    Non-Clearing Member* Direct Clearing Participant

    KYC

    Sca

    n

    KNOW YOUR CUSTOMER QUESTIONNAIRE

    Specific

    Forms Orig

    inal NCM01 ADMISSION AS NON-

    CLEARING MEMBER

    NCM02 NCM AGREEMENT

    DCP 01 ADMISSION AS DCP- CLEARING MEMBER

    O09 LIMIT ADJUSTMENT FORM

    O10 CASH COLLATERAL FORM AGREEMENT WITH SETTLEMENT BANK

    TP Forms

    Sca

    n

    TP_SEMO_01a POSSIBILITY TO FULFILL TRADES PHYSICALLY or

    TP_SEMO_01b POSSIBILITY TO FULFILL TRADES PHYSICALLY WHILE USING A THIRD PARTY

    T07 VAT DETAILS

    T10 SETUP/ MODIFICATION / DELETION OF USER-IDs not mandatory Technical

    forms

    Supplementar

    y forms

    CERTIFICATE OF COMPANY REGISTER

    PROOF OF SIGNATURES

    ANNUAL REPORT

    *reduced scope for existing NCMs 13

    Deadline ECC documentation package:

    7 Aug 2017 (for Market Trial starting Dec 2017)

  • 14

    Membership Options NCM Direct: Overview

    NCM Direct is a variation of the existing NCM membership model offered by ECC in order to

    make use of the risk management measures that are implemented in the context of DCPs.

    It is to be constructed for the spot markets only.

    The main features of the service are:

    Pre-trade limit system that NCMD can only trade up to an allocated trading limit

    that has to be fully collateralized in advance.

    ECC will refrain from calling IMSM or CESM requirements.

    ECC manages the collateral which is passed-through by the Clearing Member.

    The Clearing Member still guarantees for all exposures of the NCM Direct

    participants.

    The NCM Direct model is in the

    design phase at ECC; no firm go-live

    date possible at this stage

  • Membership Options Comparison of Models

    Non-Clearing Member Direct Clearing Participant

    Normal NCM NCM Direct

    Markets All markets Spot &

    Derivatives Spot only Spot only

    Bank Clearing Member (CM) Clearing Member (CM) Settlement Bank (SB)

    Guarantee

    function of Bank Yes, Clearing Member Yes, Clearing Member No

    Limit Voluntary, Set by Clearing Member

    Mandatory, Set by ECC based on collateral &

    credit limit set by Clearing Member

    Mandatory, Set by ECC based on collateral & credit

    limit set by ECC

    Prefunding

    No collateralization

    towards ECC but

    potentially towards the

    CM

    Collateralization of pre-trade

    limit in advance with collateral

    accepted by ECC